Several key events took place in the earlier part of the week.
One of these was a massive hack on Fidelity in August, which stole the personal information of over 77,000 users.
Cybersecurity firm Cato Networks revealed a new deepfake tool capable of bypassing the strongest exchange KYC procedures.
Heather Morgan and Ilya Lichtenstein who were responsible for the massive BitFinex hack from 2016 are facing prison time.
This week has been massively eventful for the crypto space.
Reports came out on Wednesday, that Fidelity Investments (one of the largest asset management firms in the world) got hit with a massive hack.
This breach compromised the personal information of over 77,000 customers—which is interesting because Fidelity is also one of the largest Bitcoin and Ethereum ETF issuers.
The breach (which happened between 17 and 19 August) was swiftly addressed by the firm.
However, it was only until 9 October before the news became public.
This hack, as well as several others in the crypto space earlier in the week have raised concerns.
The frequency of data security issues in the crypto space has skyrocketed in recent times and something needs to be done.
Fidelity only informed Maine's attorney general on 9 October about the incident. Said breach affected some 77,099 customers—a small but still significant portion of its customer base of over 51.5 million.
According to the asset manager, the attacker used two newly created customer accounts to gain access to customer names and other personal identifiers.
The unauthorized access was quickly terminated soon after the hack on 19 August.
In response to the hack, the asset manager has reassured clients that no fidelity accounts were compromised.
The company is even offering the affected 77,099 customers a free two-year credit monitoring and identity restoration service through TransUnion Interactive.
This recent event marks the fourth of its kind for the asset manager in the past year.
The company also saw similar breaches on 4 March, 18 March, and again on 19 July.
All of which have raised concerns about a possible vulnerability in its security systems.
Fidelity remains strong in the ETF space though, with its Fidelity Wise Origin Bitcoin Fund (FBTC) which has attracted nearly $10 billion in flows since January 2024. Additionally, the Fidelity Ethereum Fund (FETH) has also drawn in $445 million in flows since July of the same year.
In another concerning development for the crypto industry, there is a new AI-powered deepfake tool in town.
This tool is known as ProKYC, and it has the ability to bypass the strictest Know Your Customer (KYC) protocols on crypto exchanges.
According to reports, this tool was designed with a level of sophistication not seen before.
It also allows bad actors to create false identities, access crypto platforms and do all manner of things.
A new way to deepfake
This tool was unveiled by cybersecurity firm Cato Networks in a recent report.
Unlike traditional methods where malicious actors had to visit the dark web to get forged identity documents.
ProKYC uses AI to generate entirely new digital identities.
These are then paired with deepfake videos and other forged documents—before being used to bypass the most advanced KYC checks.
In a demonstration video, ProKYC was shown successfully bypassing the KYC protocols Bybit.
In the video, the AI tool generated a fake Australian passport, complete with a deepfake video of the user to trick the platform’s facial recognition system.
Again this week, Heather Morgan (better known as the rapper "Razzlekhan") is facing an 18-month jail sentence.
Razzlekhan reportedly helped launder a whopping 120,000 Bitcoin which was stolen from Bitfinex in 2016.
Recall that the Bitfinex hack in 2016 was one of the biggest in the year.
The hack saw 120,000 Bitcoin (valued at $72 million at the time) stolen from the exchange by Morgan’s husband, Ilya Lichtenstein.
Said Bitcoin's value has since rallied to a staggering $7.2 billion.
Prosecutors revealed that Morgan was initially unaware of how Lichtenstein got such a large amount of Bitcoin.
However she later consciously aided in laundering the funds.
The couple used sophisticated methods including non-compliant crypto exchanges, darknet markets and crypto mixers.
They also purchased physical gold coins with the stolen funds, which Morgan later buried in a secret location.
So far, U.S. prosecutors have recommended a light sentence for Morgan because of her “substantial assistance” and plea bargain.
Reportedly, Morgan’s sentence is relatively lighter compared to her husband.
Lichtenstein who admitted to being the mastermind of the hack, currently faces a possible 20-year sentence for his role in the conspiracy.
Both Morgan and Lichtenstein are set to be sentenced in November this year.
Morgan’s 18-month sentence will also include an order to return the crypto assets that were stolen.
These assets include over 95,000 BTC and large amounts of other cryptos like Bitcoin Cash, Bitcoin Satoshi Vision and Bitcoin Gold.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.